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Paul Schaus, CEO at CCG Catalyst, a bank management consulting firm, argues in American
Banker that banks’ investments in blockchain technology will come to full fruition
in several years due to regulatory uncertainty, but it will provide some benefits
short term in improving internal operations. He argues that banks must have realistic
Schaus noted that an IMB survey of 200 global banks indicated 15% will introduce
Expectations Must Be Tempered
Banks have to temper expectations about their returns from blockchain technology because regulatory uncertainty will cause banks to first use the technology for internal purposes that most likely will not involve money transfer.
Early blockchain deployments will involve transferring data for know your customer (KYC) rules, compliance reporting, trade finance and loan documentation. Such projects will not deliver full blockchain benefits.
Maximizing the value from blockchain technology will require leveraging numerous market participants that will share the cost of operating and building the network. Collaborations will be needed to leverage blockchain technology for transactions among participants.
Such use cases could save banking $20 billion annually from removing central authorities and clearing mechanisms, Schaus noted, citing a 2015 Santander report.
Also read: Blockchain explored by 90% of major North American and European banks, survey finds
Challenges exist before such applications emerge, a process that could take more than a decade.
To achieve these shorter-
There will be cheap computing power available from cloud-
Banks will also need to integrate these products with legacy systems. Over time, banks will learn to meet blockchain challenges at a minimum cost.
None of the challenges are impossible to solve, Schaus noted. Banks and other organizations are already working on all the challenges.